The Research and development (R&D) tax incentive replaced the R&D tax concession on 1 July 2011. The R&D tax incentive provides more generous support for businesses, especially small and medium-sized firms.
This change has brought about a significant increase in the number and size of refundable R&D offset claims. The ATO monitors R&D claims carefully as part of our compliance focus, particularly as companies are transitioning to the R&D tax incentive.
In the past year, the ATO has increased the level of data matching to ensure that companies' R&D claims are consistent with other sources, such as GST and PAYG records - more than 780 checks have been undertaken so far this year.
We are also looking beyond the companies claiming the R&D to the individuals that control or are associated with companies, in order to identify risk groups.
The R&D tax incentive is jointly administered by the ATO and AusIndustry. A new memorandum of understanding (MOU) between the ATO and AusIndustry allows for a more integrated approach to identifying and addressing risks, as well as undertaking complementary compliance work.
The ATO is currently working on several prosecutions dealing with R&D tax concession fraud which may result in court action in the coming year.
We will continue to have a strong focus on R&D claims. For more information, view our 2012-13 compliance program.
R&D tax concession fraud
In October 2012, a Western Australian tax agent was sentenced to five years imprisonment, with a non-parole period of two years, for R&D tax concession fraud.
The charges relate to seven applications for the R&D tax concession, and fraudulent tax returns prepared by the tax agent, to obtain amounts totalling over $1.3 million. The R&D claims contained inflated or non-incurred salary or contractor expenses that had not been paid.
As a result of this tax crime and R&D fraud, three of the businesses have gone into liquidation.
This is the first R&D fraud prosecution and the lengthy sentence sends a strong message that we are committed to detecting fraudulent claims and holding people accountable for their actions.